Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
DRAFT
ICANS Conference
February 28, 1994
Question No. 23
AMOUNTS RECEIVABLE
Subsection 12(1)(b) states that an amount must be included in income when it is considered receivable. Where a taxpayer accrues in its financial statements a portion of an invoice which is not released until after year end, can it exclude that portion from its taxable income because it is not truly receivable until the full amount of the invoice has been issued?
Department's Position
It is the Department's view that generally accepted accounting principles must be used in calculating income for purposes of section 9, unless the Act specifically provides otherwise. The recent decision in West Kootenay Power and Light Company Limited v. The Queen, 92 DTC 6023; (1992) 1 CTC 15 (FCA) confirms that income for tax purposes, must be computed in accordance with a method within GAAP that produces the "truer picture" and when there is only one acceptable method within GAAP and that method is reflected in the financial statements, the income for tax purposes, absent a specific provision of the Act, should not be different.
Paragraph 12(1)(b) of the Act does not set out an alternative method of computing income from a business or property. It was added for greater certainty and to ensure that certain amounts that were invoiced (or should have been invoiced) are included in income, a purpose reinforced by the special rule of interpretation for paragraph 12(1)(b) contained in subsection 12(2). As subsection 12(2) makes clear, paragraph 12(1)(b) is not to be regarded as an all inclusive method of computing income.
Officer: Carole Chouinard
File number: 7-940148
February 28, 1994
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